EKKTA | Creative Unity

EU modernizes VAT for cross border e-Commerce

The European Commission has unveiled a VAT Digital Single Market Package to improve the Value Added Tax (VAT) environment for e-commerce businesses in the EU.

The new measures are designed to allow consumers and companies, in particular start-ups and SMEs, to buy and sell goods and services more easily online. The proposals embrace a new approach to VAT for e-commerce and follow up on the commitments made by the European Commission in the Digital Single Market (DSM) strategy for Europe and the Action Plan towards a single EU VAT area.

By introducing a ‘one stop shop’ EU wide portal for online VAT payments, the European Commission expects that VAT compliance expenses will be significantly reduced, saving businesses across the EU €2.3 billion a year. The new rules will also ensure that VAT is paid in the Member State of the final consumer to help Member States to recoup the current estimated €5 billion of lost VAT on online sales every year.

The Commission is also taking steps to remove provisions that excluded e-publications from the favourable tax treatment allowed for traditional printed publications in order to enable Member States to apply the same VAT rate to e-publications such as e-books and online newspapers as for their printed equivalents.